Overview
Since the Report − 1.3%
Revenue grew 4.7% year over year, EPS beat the estimate by 19.1%; the stock rose 4.9% in its first reaction.
- RevenueQ3
- $18.09B
- ▲ 4.7% YoY · Beat Estimate by 4.5%
- EPSAdjusted
- $2.49
- Estimate $2.09 · Beat by 19.1%
Verdict
BUYMerck beat market expectations on both revenue and profit in the third quarter and raised its full-year earnings guidance. The stock rose 4.9% intraday on strong Keytruda and Winrevair sales. The real question is how much growth remains once a $550 million purchase-timing benefit unwinds in the fourth quarter.
Close on Report DayOct 29
$147.86▲ 4.9%Report-Day Move
- Market Cap(Today)
- ≈ $360 B
- 1Y Return(At Report)
- + 71%
- P/E(At Today's Price · $3.12 · Trailing 12M)
- 46.8
- Net Margin(Trailing 12M)
- 4.8%
Earnings Summary
In 30 Seconds- Revenue of $18.09 billion beat estimates by 4.5%, and adjusted EPS of $2.49 beat by 19.1%.
- Full-year EPS guidance rose to $2.77-2.82, but about $550 million of revenue came from purchase timing that will unwind.
- The stock rose 4.9% intraday on strong Keytruda Qlex and Winrevair sales and the ESMO data.
The Numbers
Keytruda Family
$8.60B
▲ 5.6% YoY · Qlex $830M
Winrevair
$694M
▲ 93% YoY · Sequential ▲ 18%
Stock Reaction
▲ 4.9%
Intraday, 12:39 ET; Update This Evening
Full-Year EPS Guidance
$2.77–2.82
Prior $2.66 – 2.76 · Estimate $2.65
Quarterly Revenue ($ Billion)
17.28
Q3 25 · $17.3 B
16.40
Q4 25 · $16.4 B · QoQ − 5.1%
16.29
Q1 26 · $16.3 B · QoQ − 0.7%
16.61
Q2 26 · $16.6 B · QoQ + 2.0%
18.09
Q3 26 · $18.1 B · QoQ + 8.9% · YoY + 4.7%
15.8–16.3
Q4 26E · 15.8–16.3 · QoQ − 11.1% · YoY − 2.0%
- Q3 25
- Q4 25
- Q1 26
- Q2 26
- Q3 26
- Q4 26E
Q4 2026 Company Guidance
- Full-Year Revenue66.8 – 67.3 billion66.8 billion67.3 billion66.8 – 67.3 billion
Midpoint 67.05 · Market Expectation 67.04 · Prior 66.3–67.3In Line ✓
- Full-Year Adjusted EPS2.77 – 2.82 $2.77 $2.82 $
Midpoint 2.795 · Market Expectation 2.65 · Prior 2.66–2.765.5% Above Estimate ▲
- Adjusted Gross Margin81%
About 81% · Q3 Actual 81.4%Flat
- Adjusted Tax Rate32% – 33%32%33%
Prior 35–36%Revised Down 3.0 Points ▲
- Adjusted Operating Expenses42.4 – 42.9 billion42.4 billion42.9 billion42.4 – 42.9 billion
Prior 42.0–42.7 · Includes One-Time R&D ChargesRevised Up 0.7% ▼
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±6.0% around the midpoint.
Segment and KPI Data
Revenue by Segment
- Pharmaceutical$16.3 BShare 90.7%▲ 4.2% YoY
- Animal Health$1.68 BShare 9.3%▲ 3.8% YoY
3% growth excluding currency
Key Metrics
Keytruda Qlex Sales
$830 M
Press Release
Gardasil Sales
$2.00 B
▲ 14.0% YoYPress Release
Welireg Sales
$307 M
▲ 56.0% YoYPress Release
Capvaxive Sales
$263 M
▲ 8.0% YoYPress Release
Enflonsia Sales
$187 M
▲ 138.0% YoYPress Release
Januvia / Janumet Sales
$380 M
▼ 39.0% YoYPress Release
Bridion Sales
$144 M
▼ 67.0% YoYPress Release
Shares are computed over the segment total: $17.9 B. Source: Press Release.
Metrics come only from the company's own filings; each one names the document it was taken from.
“2026 continues to be a year of substantial progress for our company. We're executing well on all fronts, demonstrated particularly by the many new product launches now successfully underway, and the important clinical milestones we're achieving that are further de-risking the substantial long-term opportunity of our late-phase pipeline. The opportunity we have to drive strong long-term growth beyond the KEYTRUDA LOE period is becoming increasingly clear.”
- De-risking the Late-stage Pipeline
- New Product Launches Accelerating
- Growth Beyond the Patent Loss
Summary and Review
Summary
Merck's third-quarter revenue was $18.09 billion. That is 4.7% higher than a year ago and 4.5% above the market expectation. Adjusted earnings per share were $2.49, beating the estimate by 19.1%. The result includes a $0.12 charge for the SciBrunch license. The Keytruda family sold $8.60 billion. Winrevair sales nearly doubled. Excluding currency, total growth was 4%. Animal Health also grew 4%, helped by new pet products.
The stock has been rising since the open; it was up 4.9% as of 12:39 p.m. ET. The market read this report not as a Keytruda story, but as a pipeline story. The call centered on sac-TMT and intismeran data presented at ESMO. Still, about $550 million of revenue came from U.S. purchase timing. The company said this benefit will unwind in the fourth quarter and in 2027. The stock is up about 40% year to date.
Two of three gates are open: revenue beat by 4.5% and earnings by 19.1%. The guidance gate is in line, because the midpoint of the full-year revenue range matches the estimate. The earnings guidance midpoint rose by $0.085. That increase is smaller than the $0.40 beat in the quarter. The score is 72 and the verdict is buy. The caveats are timing-driven revenue, a lower GAAP gross margin and a modest growth signal for 2027.
Full Review
Keytruda is growing, but slowing.
Keytruda family sales were $8.60 billion. That is up 5.6% from a year ago, or 6% excluding currency. The family's share of total revenue was 47.6%, versus 47.2% a year earlier. Growth came from earlier-stage use in breast, cervical, head and neck and bladder cancer. The subcutaneous version, Keytruda Qlex, sold $830 million. Last quarter that figure was $463 million, a 79% sequential increase. Qlex is the company's first line of defense against the 2028 U.S. patent loss. There is one warning, however. U.S. channel inventory rose this quarter, and the company says it will unwind in the fourth quarter. Management also said some approved indications are nearing peak revenue. German pricing policy will add pressure in 2027. So Keytruda is still growing, but it is no longer the whole growth story.
New products are starting to carry the load.
Winrevair sales were $694 million. That is up 93% from a year ago and 18% from last quarter. About 1,600 new U.S. patients received a prescription. The FDA approved the HYPERION label update that was expected last quarter. Welireg rose 56% to $307 million. The RSV product Enflonsia sold $187 million, and Ohtuvayre, from the Verona deal, sold $184 million. Gardasil sales rose 14% to $1.995 billion. A large CDC purchase and pricing drove that gain. The company says most of the vaccine timing benefit will unwind in 2027. Older products keep eroding: Januvia/Janumet fell 39% and Bridion fell 67%. Generic competition is the reason for both. New products more than offset this erosion for now, but part of that balance rests on inventory timing.
Margins narrow as spending rises to invest.
Adjusted gross margin was 81.4%. A year ago it was 81.9%, so it narrowed by 0.5 points. GAAP gross margin fell from 77.7% to 72.9%. That 4.8-point drop reflects amortization from acquisitions and restructuring costs. Adjusted operating expenses rose 12% to $7.4 billion. They include a $400 million upfront payment to SciBrunch. The Blackstone funding deal cut R&D expense by $200 million. Other expense rose from $106 million to $420 million. Financing costs for recent acquisitions drove that increase. The adjusted tax rate fell to 10.9% on discrete items, which supported earnings. In the end, adjusted EPS fell 3.5% from a year ago. Profit falling while revenue grows shows the company is pulling spending forward to prepare for the patent loss.
Guidance up, but a cautious 2027 signal.
The company narrowed full-year revenue guidance to $66.8-67.3 billion. The prior range was $66.3-67.3 billion. The midpoint is $67.05 billion, against a market expectation of $67.04 billion. Adjusted EPS guidance rose to $2.77-2.82. That range includes $6.05 of one-time charges for Cidara, Terns and SciBrunch. Nine-month sales were $50.98 billion. This implies fourth-quarter revenue of $15.8-16.3 billion. That is below the $16.40 billion of a year ago. For 2027, the company expects only modest revenue growth. It sees generic competition for Bridion, lower vaccine use and mid- to high-single-digit expense growth. According to the earnings call, CEO Davis plans to raise the $70 billion mid-term target for new products set in January.
Next quarter, watch the Qlex line.
Keytruda Qlex sold $830 million this quarter. In the fourth quarter, the Keytruda inventory benefit will unwind. If Qlex still tops $1 billion, the subcutaneous switch is on track before the patent loss. That would be the best sign for the revenue base after 2028. If Qlex falls below $830 million, part of this quarter's growth came from inventory. The second measure is Winrevair. The company says channel inventory will unwind for this product too. Staying above $694 million would show the demand is real. Falling below it would mean the gain was inventory-driven. If both lines weaken together, the modest 2027 growth signal gets heavier. For the basics of reading a report, see the earnings day guide.
Looking Ahead
Strengths and Risks
5 Strengths · 5 RisksStrengths
5- Revenue of $18.09 billion beat the market expectation by 4.5%, and adjusted EPS beat by 19.1%.
- Keytruda Qlex sales rose from $463 million to $830 million in one quarter.
- Winrevair grew 93% year over year, and the FDA approved the label update based on HYPERION data.
- Positive Phase 3 data for sac-TMT and intismeran were presented at ESMOThe sac-TMT filing got priority review.
- The full-year adjusted EPS guidance midpoint of $2.795 is 5.5% above the market expectation.
Risks
5- About $550 million of quarterly revenue came from U.S. purchase timing and will unwind in the fourth quarter.
- GAAP gross margin fell 4.8 points in a year, from 77.7% to 72.9%.
- The company expects only modest revenue growth and mid- to high-single-digit expense growth in 2027.
- Keytruda's U.S. compound patent expires in 2028, and the company says some indications are nearing peak.
- Januvia/Janumet fell 39% and Bridion 67%, as generic competition keeps eroding older products.
What to Watch
5- ~February 2027Fourth-quarter results and 2027 guidance; the inventory unwind will show up in this quarter.
- Near term — Phase 3 ATLAS results for tulisokibart in ulcerative colitis are due.
- Next 12 months — an FDA filing for intismeran and results from the BAROLO study of remigromig are expected.
- June 15, 2027FDA decision date for sac-TMT in endometrial cancer; the company hopes for earlier approval.
- 2028Keytruda's U.S. compound patent expires; the pace of the Qlex switch will be decisive.
Upcoming Earnings
To Understand This